RBI Announces More Measures To Deal With Covid-19 Crisis
RBI has now announced relief measures for exporters and allowed states to borrow more to manage finances amid Covid-19 crisis.
After an emergency rate cut, easier asset quality norms and loan moratorium to fight disruptions caused by the coronavirus outbreak, the Reserve Bank of India has now announced relief measures for exporters and allowed states to borrow more to manage finances.
The pandemic has stalled business and the International Monetary Fund has already declared a recession. In India, 1.3 billion citizens are under a three-week long lockdown as the number of Covid-19 cases rose to more than 1,600, including 38 deaths. Besides the RBI, the government announced a Rs 1.7-lakh-crore stimulus.
Here’s what the RBI announced for exporters and states:
Extension Of Realisation Period Of Export Proceeds
For exports made up to or on July 31, RBI extended the deadline for realisation and repatriation period of export proceeds to 15 months from nine months at present.
This will enable exporters to realise their receipts, especially from Covid-19 affected countries, within the extended period and provide greater flexibility to exporters to negotiate future contracts with buyers abroad, RBI said in a release on Wednesday.
Ajay Sahai, director general and chief executive officer of the Federation of Indian Exports Organisation, said the move was in recognition that demand had been slow and realisation of remittances would likely take longer considering the impact of the spread of the coronavirus on the global economy and foreign trade. This, according to him, will help exporters from a regulatory standpoint and can be used as a marketing tool.
Review Ways & Means Advances Limit For States
The RBI constituted an advisory committee to review ways and means limits—limit for short-term credit that governments can borrow from the central bank—for states and union territories. Pending submission of the committee’s report, it has also been decided to increase the ways and means limit by 30 percent from existing threshold for all states and union territories, the RBI’s release said.
The move is expected to bring some relief to state governments to tide over the pandemic. The revised limits will come into force with effect from April 1 and will be valid till Sept. 30.
On Tuesday, the RBI had raised the ways and means advances limit for the central government to Rs 1.2 lakh crore for the first half of 2020-21.
Implementation Of Counter-Cyclical Capital Buffer
Counter-cyclical buffer for banks will not be applicable for a period of one year, the RBI said. The framework on the counter-cyclical capital buffer is scheduled to be activated as when the situation arises. The RBI’s framework envisages the credit-to GDP gap as the main indicator, along with other supplementary indicators.
The RBI introduced the counter-cyclical capital buffer framework in 2015 with the aim for banks to build up capital that may be used by them to maintain the flow of credit in difficult times. The framework was also to prevent banks from indiscriminate lending in periods of excess credit growth.